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Mr. Desmond Swayne (New Forest, West): On the PFI, does my hon. Friend share my scepticism about the PFI attempting to draw the private sector into the provision of finance at which the state is much better? The taxpayer often gets a worse deal.

Mr. Tyrie: My hon. Friend makes his own point in his own way. I enjoyed it very much.

Mr. Oliver Heald (North-East Hertfordshire): Would my hon. Friend like to comment on the concept of the year-end?

Mr. Tyrie: I am at risk here. I think that I will leave the year-end for another week, if not another year.

I could mention one other little fiddle that the Government have engaged in: the working families tax credit. As it has been talked of in some detail, I will not develop it further.

I have argued that we need independence and the drawing-up of standards and definitions in accounts. That is already a significant problem in the system that we have now, but it is likely to become much worse under a system of resource accounting. I wish to cite a few areas where there is a risk of the problem becoming more serious.

How will some of the Government's assets be valued--for example, recreational facilities such as public parks? How will we score parks under resource accounting? Does that not leave huge scope for massaging the figures? How will defence assets be scored under resource accounting? How much confidence can we have in the assumptions that the Government make when putting them into resource accounts? Would it not be better if an independent body scrutinised the definitions and standards that were applied?

The key PFI issue with respect to resource accounting is: are PFI projects to be on the balance sheet of the Department? Huge future commitments are involved with the PFI. There is a clear case for putting them on the balance sheet.

What about provisioning, which has not been raised at all? How will the public sector be protected from the pernicious effects of what is known as teaming and lading? I cannot possibly expect the Minister to know the

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answer off the top of her head, but I should be grateful for some response from her via the Box on provisioning, which is central to time-sensitive issues in public accounts. That is what resource accounting is intended to improve.

Resource accounting can all too easily become a means for getting future generations to pay for present spending. We should be extremely cautious about that. That is why new clause 1, which creates an independent body, will be such a help.

10.15 pm

I said at the start of my speech that I wanted to discuss briefly some of the wider benefits that I think will come from the creation of an independent body. There are several such benefits, which will go far beyond merely clamping down on the scope for creative accounting.

The body could, for example, give much greater credibility to the Red Book and assist in giving the public a wider understanding of macro-economic policy. I have not met anyone who understands the current Red Book. I do not understand it, although I used to try to help to draft earlier ones. I used to sit down with late drafts of the Red Book and try to improve them.

I do not have a clue about the current Red Book. It does not matter which way up it is held, it is basically gibberish. All the definitions have been changed, there is no continuity in the series, and many of the phrases and much of the language is impenetrable. It has become a glossy apology for the lack of an explanation of what is going on in the economy.

Without an independent body to keep an eye on all that, I can easily see how resource accounting will make the Red Book even more difficult to understand, as we shall have a series of resource accounting standards built into a whole host of numbers. For a start, we shall have several sets of parallel accounts that could be extremely difficult to cope with.

I should give an example of one crucial concept that could get badly mucked around by resource accounting in the Red Book. The golden rule is a key notion in which the Government place great store. I think that it is a lot of nonsense, and, these days, so do the German Government, who more or less invented it. Nevertheless, just as the German Government have more or less abandoned the notion, the Labour party has discovered it.

On Second Reading, when I asked the Economic Secretary--who is having a chat at the moment--whether resource accounting would affect the calculation of the golden rule, which will be applied in the Red Book, she said:


I must admit that I was a bit perplexed by that answer. Much nearer to the right answer is one that I received, via the Library, from the Office for National Statistics, which states:


    Initial estimates, based on dry run resource accounts for 1998/99, suggest an upward revision of the estimated capital stock of central government at end-1998 of around £6 billion. However, this is offset by downward revisions to the figures for local authorities and public corporations based on evidence from other sources. Overall the public sector depreciation charge for 1998 might be revised up by around £¾ billion.

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Resource accounting will therefore have huge effects--£5 billion or £6 billion in one direction, and £5 billion or £6 billion in the other--on the calculation of the golden rule. Although the Government say that the golden rule is one of the most fundamental concepts that they have introduced--I believe that it is a nonsense concept--the Minister was not even aware that it might be seriously affected by the introduction of resource accounting.

The independent body could, because it would truly be independent, decide to examine such issues. It could thereby give much greater credibility to the accounts, including the accounts provided in the Red Book. It could also help to establish a commonly agreed set of public accounting concepts by which Government performance could be judged, not only on individual spending programmes, but on overall macro-economic policy.

I fear that, far from moving in that direction, we are moving in the opposite direction. We are seeing the National Audit Office being used to give an air of respectability and stamp of approval to a whole range of tasks and issues, including the national accounts, when in fact no such respectability is deserved. The Government pretend that the fiscal forecast, for example, is being properly vetted by the NAO. However, in truth, the NAO does not examine the revenue or the expenditure assumptions in any detail at all. It cannot do so, it is not authorised to do so, and it does not have the resources to do so. In any case, the Treasury would not want it to.

The truth is that there is no real scrutiny of the fiscal forecast at all. It is just the type of function that a truly independent body, once created, could get its teeth into, and that would be immensely beneficial to assist with an understanding of what is going on in the public accounts, in enabling a wider public debate, and, ultimately, in strengthening democracy. That is why I favour an independent body with a name along the lines of "Fiscal Policy Committee". That would be preferable to some of the other names that have been suggested.

As I have tried to explain, the existing code for fiscal stability is meaningless, because the numbers are so easily subject to manipulation by the Treasury. That is true even before resource accounting. I shall give one example of how easy it is to fiddle the numbers. I should be fascinated to know what assumptions are built into the forecast for the oil price. Perhaps the Minister will be able to tell me--or perhaps she will decide that she does not want to. Do the Government assume that the oil price next year will be the same as it is today? Have they taken an average of the past three months, six months, nine months or 12 months, or is the price for oil in the futures market being used? Each of those assumptions will have dramatically different effects on the bottom line--the public sector financial deficit, as we now have to call it, although it is nearly the same as the public sector borrowing requirement. It is one of those numbers that has been put in the Red Book more to confuse than enlighten us. The NAO is not authorised to go into such detail, but an independent body along the lines suggested in the new clause could eventually do so. That would be all to the good.

The case for an independent body is overwhelming. I cannot think what possible reasons the Government have for opposing the new clause, unless it is that they want to retain the freedom to carry on with the ripping wheezes and fiddles. I understand that by accepting the new clause, the Treasury would be passing up the

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opportunity for a good deal of leeway for creative accounting, but the Government must realise that not just all the logic but much accounting practice worldwide points to the creation of such an independent body.

I said at the start of my speech that resource accounting without full public scrutiny and transparency would not deliver enough public confidence and might not be worth having. Ministers need to think carefully about that issue. I strongly urge them either to accept the new clause or to come forward with a similar proposal to ensure public confidence and bolster democracy.

Mr. Swayne: I came late to the debate from Standing Committee F. I came with some suspicion, because I do not normally support consensus. I am normally particularly suspicious when there are such strange bedfellows as those who tabled the new clause. However, having listened to the debate, I am increasingly persuaded of the merits of the new clause. The Bill would be a poor affair without it.

In the interests of brevity, I shall deal with subsection (2) and then go on to the purpose of the new clause outlined in subsection (1). Whatever those who have framed the clause might be accused of, it cannot be of not presenting sufficient choice to the Government. The Government have a wide range of options to debate on how the independent body should be constituted.

I shall run briefly through the three options. Subsection (2)(a) refers to


One of my annual pleasures in this place has been to chair parliamentary gatherings of the Southern Society of Chartered Accountants. A finer body of men there could not be. They might well fulfil the function outlined in the paragraph, but their concerns might lack the national focus that would be required.

Equally, paragraph (b) identifies


That would be a fundamental requirement, as the international angle is very important. However, such a body would lack the proper focus of the Southern Society of Chartered Accountants with its parochial concerns. There has to be a balance between the two, so undoubtedly we are led by a process of elimination to paragraph (c), which identifies


    a new body, established for that purpose,

as such a body would have the advantages of the Southern Society of Chartered Accountants and the international accountancy profession, with their national and regional perspectives and, I would suggest, the parliamentary gate-keeping role of the Public Accounts Committee, chaired by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). Only a combination of all those attributes would produce a body that was truly fitting of the term "Independent Body" as set out in subsection (1) of the new clause.


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